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Maximize Business Cash Flow with these 10 Tips

Maximize Business Cash Flow with these 10 Tips

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No matter the type or size of an organization, effectively managing business cash flow is always important, and is often a top concern.  Here are ten tips that can help you run a leaner business and maximize business cash flow, so you can grow your organization.

6 Signs You Need to Expedite Business Cash Flow

Cash flow is important to every business – so much so that one of the most commonly used financial statements for any business is called a cash flow statement. Understanding the flow of money coming into, and going out of your business can bring eye-opening revelations, especially if you are experiencing symptoms that point to inadequate cash flow; such as:

  • Scrambling to fund payroll
  • Inability to take advantage of vendor’s early-pay discounts
  • Failing to meet investor’s expectations or repayment schedules
  • Not reducing long term debt or increasing equity
  • No reserves for emergencies
  • No money to buy new equipment or fund expansion

Earlier we published an article titled Which Came First, the Chicken or the Cash Flow Problem where we talked about the ten most commonly cited reasons new businesses fail, noting both their relationship to cash flow and the warning signs that might point to problems on the horizon. With that in mind, here are ten tips that can help you maximize business cash flow so you can stretch every dollar and put it to work to help you grow your organization.

10 Tips to Help You Maximize Business Cash Flow

1. Raise prices.

If it’s been a while since you set or raised pricing, you may be surprised to find that some of your profit margins have been diminished or disappeared altogether.  Schedule a time each quarter to review pricing and profit margins in relationship to not only current expenses, but long-range plans and the competitive marketplace.

2. Improve upgrade and add-on sales.

You’ve landed a new customer – now what? Before you finalize a contract or sale to a new customer, make sure you aren’t leaving money on the table in the form of upgrades, additional services, expediting or add-on sales that could give you a bigger return on the cost of customer acquisition.

3. Cut costs.

No matter how lean your business operations are, over time there will always be new ways to cut costs and eliminate waste. Along with scheduling a regular review of pricing or profit margins, set aside time on a regular basis to review line item expenses and look for those which are no longer needed.

4. Incentivize innovation.

This is a perfect example of a time when you should spend money to make money. Enlisting staff in coming up with ways to improve your business, cut costs, become more efficient and eliminate waste is a great investment for the long term.

5. Speed up collections.

Yes, you can speed up collections (and expedite cash flow) by putting the pressure on your customers or setting up quick-pay discounts; but you can also get immediate access to unpaid customer invoices by factoring them with a factoring company like Corsa Finance.

The minimal cost of invoice factoring (as low as 5% of an invoice amount for small invoices and less for larger balances) can often be more than offset by the competitive advantage you gain when you can extend longer payment terms to your own customers.  Factoring fees can also be more than offset when expedited cash flow means that you can take advantage of vendor and supplier’s early pay discounts yourself.

We would be happy to help you discover whether factoring would represent an overall cash flow gain for your business – at no cost to you. Use the form below to request a free, no-obligation factoring quote; you could go from approval to your first funding in hours, instantly expediting business cash flow.

Request a no-cost, no-obligation quote:

6. Take advantage of industry discounts and offers.

From group buying discounts to industry or networking group offers, there could be many opportunities for you to get more from every dollar you spend.  Sometimes the only investment that you will need to make to take advantage of these offers and discounts is time!

7. Eliminate petty cash.

Once upon a time it was smart for business owners to keep a little – or even a lot – of cash on-site for emergency use or to fund incidentals.  The problem with petty cash is that keeping track of what the money was used for or removing the temptation to dip into it unnecessarily can be difficult.  If maximizing cash flow is your goal, make sure that you can account for every dollar that is leaving your business.

8. Negotiate.

Some people have a natural talent for negotiating. For the rest of us, it must become a learned skill. Failing to negotiate (or at least find out whether there is room to negotiate) with vendors, investors, customers, lenders, landlords and other entities that impact your business cash flow – in-coming or out-going – will nearly always mean that you spent money unnecessarily or did not receive as much money as you could have earned.

9. Audit.

It’s easy to set it and forget it when it comes to vendors and suppliers. Make sure you have a time established, especially before auto-renewals or in the case of perpetual agreements where you will review terms, renegotiate, and compare other options.

10. Flex your muscles!

Cash flow represents buying power and leverage.  Make sure you ask vendors and suppliers for early-pay discounts and take advantage of all that exist. Remember that factoring invoices can speed up cash flow, which could give you the ability to negotiate lower prices and reduce your expenses. These discounts may not show up on your cash flow statement or any other financial statements, but that doesn’t mean they won’t add up quickly.

customer payments

7 Ways to Speed Up Customer Payments

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Waiting on customer payments? Leverage these ideas to speed up business cash flow so you can focus on growing your business, instead. STUDY – 3 Out of 10 US Businesses Not Paid On Time According to the 2018 Global Trade Credit Payments Study by Dun & Bradstreet, U.S. companies in many industries are not being […]

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Business Turnaround Strategy and Invoice Factoring Go Hand in Hand

Business Turnaround Strategy and Invoice Factoring Go Hand in Hand

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The top priority in most business turnaround strategies is to speed up and stabilize cash flow, giving a company time to cut expenses, grow sales and regain momentum. Invoice factoring can play a key role as part of a business turnaround plan; here’s why.

Top Business Turnaround Strategy Priorities for Distressed Companies

Implementing tactics for stabilizing cash flow and collecting payments on invoices as quickly as possible is usually priority one when business turnaround consultants come in to help a struggling business. Why? Simple: Speeding up cash flow buys time for a struggling business – time that is critical to allow business restructuring, operational, personnel and procedural changes to be enacted, take root and begin making a difference.

In Best Practices for Turning Around Distressed Companies: The First Steps, the CEO and managing partner of NYC Advisors LLC advises that step one in a business turnaround strategy is to get control of cash and cut unnecessary expenses, including “Collecting your accounts receivables as quickly as possible,” even if it means offering cash discounts for faster payment.

In lieu of offering cash discounts to customers for remitting payments within the first few weeks after an invoice goes out, a struggling business could receive payment on a customer invoice within 1-2 days of when the invoice is generated by factoring, or selling, the invoice to a factoring company for a small fee (called a factoring fee). Furthermore, the factoring fee charged for same day payment on customer invoices will probably be significantly less than a quick-pay customer discount and may even be tax deductible.

Invoice factoring could be preferable to offering customers early payment discounts for many different reasons; such as:

  • Early pay discount still means a delay in collecting on receivables of a few or even several weeks
  • There is no guarantee that a customer will take advantage of an early pay discount, especially if it’s a fairly minimal percentage
  • If early pay discounts are offered to all customers, over time a business could earn significantly less than it might have otherwise collected
  • Customers may come to perceive early pay discounts as “the real price” of goods or services and devalue them in the process
  • Customers may compare terms and demand that their terms be equally favorable to others
  • Early pay discounts may need to be fairly significant (5%, 10% or even more) to get customers to pay right away, whereas your factoring fee will likely range between 4-8%.

Invoice factoring offers a business tools that can stabilize cash flow right away, at a minimal cost. We have programs with factoring fees that start as low as 4 percent which is less than many customer early-pay discounts. In addition, instead of waiting a couple (or several) weeks for customers to pay, factoring clients can get free same-day funding on invoices factored with us, with advances up to 90 percent of an invoice amount.

How Invoice Factoring Can Fuel a Business Turnaround Strategy

For struggling or distressed companies, low cash flow is often the most pressing challenge to address. Speeding up cash flow is a top priority. Without adequate and consistent cash flow, a struggling business will not have time to remediate the problems with its pricing, personnel, marketing, purchasing, overhead and other operational areas that can turn a struggling company back into a thriving enterprise. In other words, speeding up cash flow gives a struggling business the working capital needed to put other components of its turnaround strategy into motion.

Invoice factoring enables businesses that invoice customers for payment on terms to collect payment on invoices immediately, without waiting for customers to pay, for a small fee (called a factoring fee). We can help distressed companies get agreements into place so they get an advance of over 90 percent of the face value of the invoice within 1-2 days of when an invoice is factored at a small cost (or factoring fee) which could be as low as 4 percent.

Here’s how the process works:

DAY ONE Client factors a $10k invoice $10,000
Receive a 93% advance on the invoice $  9,300
Factoring company earns 4% $     400
3% held in reserve $     300
DAY 30, 45 or even 90+ Customer remits payment in full
3% reserve returned to client $     300

 

In this example, factoring the invoice gives a struggling business access to as much as $9,300 on the same day the invoice is generated, and ultimately collects another $300 for a total of $9,600 collected. If the same business elected to extend a 5 percent within 14 days early pay discount to its customer instead, it might wait up to two weeks to collect any money on the invoice at all, and still only receive $9,500 of the invoice amount.

If the customer elects not to take advantage of the early pay discount, the business could receive the full amount but may wait 30, 60 or even 90 days to collect on the invoice. In addition, the business owner or bookkeeping staff may have to invest hours of time on collection phone calls and reminders before the customer pays.

Another advantage of choosing invoice factoring to speed up cash flow as part of a business turnaround strategy (instead of offering customer fast-pay discounts) is that the business can continue (or begin) to extend favorable payment terms to its customers as a marketing advantage. Since the business can collect on the invoice on the same day it’s generated, it does not have to spend time or resources chasing payments or worrying about how quickly a customer will pay.

Benefits of Our Invoice Factoring Services for Your Business Turnaround Strategy

Our goal is to help our clients grow their organizations from where they are today to where they want to be tomorrow. This mantra has impacted the way Corsa Finance tailors invoice factoring programs for our clients and how we do business. For distressed companies, our program can make invoice factoring even more effective as part of a business turnaround strategy, with potential benefits such as:

  • No factoring minimums – clients only factor when it’s best for their business
  • No long-term contracts – use factoring as a transitional, short-term or long-term solution
  • Low factoring fees
  • Competitive advances and fast funding
  • Personal, professional customer care with a knowledgeable account manager
  • Program tailored to the needs of the business instead of a “one size fits all” approach

A free, no-obligation quote is all it takes to find out how factoring invoices can instantly speed up and stabilize your organization’s cash flow, creating a consistent flow of working capital that enables your business to regain market share, keep customers, employees and vendors happy and put your company on a faster track for growth.

We would be happy to provide you with a free, no-obligation quote for invoice factoring services, even it you simply want to compare it with your current factoring agreement to be sure your business is getting the maximum benefit from receivables financing: